Takeaways from Cloudera's S-1 revision: Officially a down-round, valuation looks reasonable but not a slam-dunk

April 14, 2017

Cloudera filed a revised S-1 this morning, here are the key takeaways and my thoughts on the initial valuation range:

 

1) Cloudera is selling 15m shares, with the standard 15% greenshoe on top (extra shares that may be sold if the offering is performing well, or bought back at the discretion of the underwriting banks if the price falters). At the high end of the range ($14), this will lead to a total offering size just north of $240m.

 

2) Intel has announced it intends to acquire 10% of the offering. This is a positive sign, but Intel owns 22% of the company already so this equates to only a minor expansion of their investment and their ownership interest will still decline as a result of the dilution from the offering. 

 

3) Cloudera has seen $850m invested to date, at an average price of $7.52/share. 

 

4) This valuation confirms what many suspected and I previewed in an earlier piece: Cloudera's IPO will be a significant down-round from the $4bn+ valuation it received way back in 2014. 

 

Valuation Thoughts: Overall, while the range is higher than I would have started with, this seems like a fair price to give the IPO a reasonable chance of success, though much will hinge on the roadshow and investors' confidence that the story here will work out differently that Hortonworks (HDP) which trades at a much lower multiple than the IPO implies. Still, I feel much less confident in Cloudera's performance at this price than I did about Mulesoft/Okta. Even at this new lower valuation, investing in Cloudera is not a no-brainer:

 

 

 

My gut says that unlike recent IPOs which have raised their initial ranges on strong demand, Cloudera is likely to stay put, even though it looks slightly inexpensive on an EV/GP basis. The key impediment here is the history and existence of Hortonworks as a comp: investors are likely to price Cloudera at a discount to peers as a result. Considering that, this initial range looks to be just about right- a slight discount to other SaaS companies.

 

None of this detracts from Cloudera's awesome success in the slightest: as I mentioned in my prior blog post on it, 2014 private markets software valuations were simply too damn high

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